Tigers Staging A Comeback
The upward revision of the weightage of the south-east Asian economies reflects their growing strength after the 1997 economic crisis. While the recovery augurs well for India's export prospects, experts fear that foreign direct investment may be diverted to more attractive destinations.
East Asia accounts for about 16 per cent of India's exports. This had dropped to 11.3 per cent in 1998-99. With these economies recovering, experts are not surprised that Indian exports, too, are showing fresh signs of buoyancy.
Most of the South-east Asian economies have reduced their current account deficit and pushed up foreign currency reserves primarily through exports.
"More importantly, for the three IMF economies_South Korea, Thailand and Indonesia_whose external deficits triggered the 1997 crisis, restoration of external surpluses has been accompanied by domestic reforms making a repetition of that crisis unlikely," says Bank of America in its latest economic outlook for the region.
However, most of the currencies still remain, in varying degrees, undervalued. And this will provide a floor to the likely deterioration of these surpluses as the cyclical upturn and, hence, imports growth, continues in 2000-2001.
The gross domestic product in these economies is expected to grow in the range of 4 to 7.2 per cent. This is in sharp contrast to the trend two years ago, when growth rates declined by 10.2 per cent (Thailand) to 0.5 per cent (Philippines).
Similarly, the inflation levels are also expected to moderate in the current year. Projections carried out in the BoA study show that it would be in the range of 2-5.5 per cent. The stunning recovery is that of Indonesia, which is expected to bring down the inflation rate from a peak of 57.6 per cent in 1998 to 5.5 per cent in the current year.
Even more impressive is the recovery with respect to exports. While exports ranged between 10-24 per cent in August 1999, the annual rate of growth (with the exclusion of Philippines) at the end of February ranged between a low of 17 per cent (Malaysia) and a peak of 37 per cent (South Korea).